HUNTSMAN CORPORATION Recent Developments
See "Part I. Item 1. Business-Recent Developments" for important updates that
occurred in our businesses for the year ended
Outlook
We expect the following factors to impact our operating segments:
Polyurethanes:
? First quarter 2021 adjusted EBITDA projected to be slightly more than double
first quarter 2020 results, including turnaround-related headwinds
? Positive trends in construction (including spray polyurethane foam),
automotive and elastomer markets
? Continued strength in
polymeric systems for first quarter 2021 compared to fourth quarter 2020
Performance Products:
? First quarter 2021 adjusted EBITDA to be up approximately 10%-15% compared to
first quarter 2020
? Improving volumes in the
compared to first quarter 2020
? Positive volume trends across the portfolio from fourth quarter 2020 to first
quarter 2021
Advanced Materials:
? First quarter 2021 adjusted EBITDA to be up approximately 40% compared to
fourth quarter 2020
? Improving trends from fourth quarter 2020 to first quarter 2021 across all
markets, including aerospace
? Synergy capture from acquisitions on track
Textile Effects:
? First quarter 2021 adjusted EBITDA to be up slightly compared to first quarter
2020
? Favorable trends in sustainable solutions
? First quarter 2021 orders returning to 2019 levels
In 2020, our adjusted effective tax rate was 19%. For 2021, our adjusted effective tax rate is expected to be approximately 22% to 24%. For further information, see "-Non-GAAP Financial Measures" and "Note 20. Income Taxes" to our consolidated financial statements.
Higher Insurance Costs in 2021
During 2020, we saw a deterioration in insurance markets in which we participate, particularly for property and excess/umbrella liability insurance. Rates increased significantly for these coverages, terms and conditions were restricted and some insurers either reduced their available capital or stopped underwriting accounts in the chemical sector. As a result, our annual insurance expense will increase from$32 million in 2020 to$52 million in 2021. We customarily prepay our insurance expense and, accordingly, we prepaid our 2021 insurance expense inDecember 2020 . This prepaid expense will be recognized ratably in our statements of operations in 2021.
Refer to "Item 1A. Risk Factors" for a discussion of the factors that may impact our business, results of operations, financial condition or liquidity and "Forward-Looking Statements" for a discussion of our use of forward-looking statements.
30
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Table of Contents ReSULTS OF OPERATIONS For each of our Company andHuntsman International , the following tables set forth our consolidated results of operations for the years endedDecember 31, 2020 , 2019 and 2018 (dollars in millions, except per share amounts).Huntsman Corporation December 31, Percent Change 2020 2019 2018 2020 vs 2019 2019 vs 2018 Revenues$ 6,018 $ 6,797 $ 7,604 (11 )% (11 )% Cost of goods sold 4,918 5,415 5,840 (9 )% (7 )% Gross profit 1,100 1,382 1,764 (20 )% (22 )% Operating expenses 618 954 942 (35 )% 1 % Restructuring, impairment and plant closing costs (credits) 49 (41 ) (7 ) NM 486 % Merger costs - - 2 - (100 )% Operating income 433 469 827 (8 )% (43 )% Interest expense, net (86 ) (111 ) (115 ) (23 )% (3 )% Equity in income of investment in unconsolidated affiliates 42 54 55 (22 )% (2 )%
Fair value adjustments to Venator investment and related loss on disposal (88 ) (18 ) (62 ) 389 %
(71 )%
Loss on early extinguishment of debt - (23 ) (3 ) (100 )% 667 %
Other income, net 36 20 32 80 % (38 )%
Income from continuing operations before
income taxes 337 391 734 (14 )% (47 )%
Income tax (expense) benefit (46 ) 38 (45 ) NM NM
Income from continuing operations 291 429 689 (32 )% (38 )%
Income (loss) from discontinued
operations, net of tax 775 169 (39 ) 359 % NM
Net income 1,066 598 650 78 % (8 )%
Reconciliation of net income to adjusted
EBITDA:
Net income attributable to
noncontrolling interests (32 ) (36 ) (313 ) (11 )% (88 )%
Interest expense, net from continuing
operations 86 111 115 (23 )% (3 )%
Interest expense, net from discontinued
operations - - 36 - (100 )%
Income tax expense (benefit) from
continuing operations 46 (38 ) 45 NM NM
Income tax expense from discontinued
operations 242 35 86 591 % (59 )%
Depreciation and amortization of
continuing operations 283 270 255 5 % 6 %
Depreciation and amortization of
discontinued operations - 61 88 (100 )% (31 )%
Other adjustments:
Business acquisition and integration
expenses and purchase accounting
inventory adjustments 31 5 9
Merger costs - - 2
EBITDA from discontinued operations(2) (1,017 ) (265 ) (171 )
Noncontrolling interest of discontinued
operations - - 232
Fair value adjustments to Venator investment and related loss on disposal 88 18 62 Loss on early extinguishment of debt
- 23 3
Certain legal and other settlements and
related expenses 5 6 1
(Gain) loss on sale of businesses/assets (280 ) 21 -
Income from transition services
arrangements (7 ) - -
Certain nonrecurring information
technology project implementation costs 6 4 -
Amortization of pension and
postretirement actuarial losses 76 66 67
Plant incident remediation costs 2 8 -
Restructuring, impairment and plant
closing and transition costs
(credits)(3) 52 (41 ) (6 )
Adjusted EBITDA(1) $ 647 $ 846 $ 1,161 (24 )% (27 )%
Net cash provided by operating
activities from continuing operations $ 277 $ 656 $ 704 (58 )% (7 )%
Net cash provided by (used in) investing activities from continuing operations 1,462 (201 ) (615 )
NM (67 )%
Net cash used in financing activities (655 ) (450 ) (424 )
46 % 6 %
Capital expenditures from continuing
operations (249 ) (274 ) (251 ) (9 )% 9 %
31--------------------------------------------------------------------------------
Table of ContentsHuntsman International December 31, Percent Change 2020 2019 2018 2020 vs 2019 2019 vs 2018 Revenues$ 6,018 $ 6,797 $ 7,604 (11 )% (11 )% Cost of goods sold 4,918 5,415 5,837 (9 )% (7 )% Gross profit 1,100 1,382 1,767 (20 )% (22 )% Operating expenses 612 949 937 (36 )% 1 % Restructuring, impairment and plant closing costs (credits) 49 (41 ) (7 ) NM 486 % Merger costs - - 2 - (100 )% Operating income 439 474 835 (7 )% (43 )% Interest expense, net (88 ) (126 ) (136 ) (30 )% (7 )% Equity in income of investment in unconsolidated affiliates 42 54 55 (22 )% (2 )%
Fair value adjustments to Venator investment and related loss on disposal (88 ) (18 ) (62 ) 389 %
(71 )%
Loss on early extinguishment of debt - (23 ) (3 ) (100 )% 667 %
Other income, net 33 16 27 106 % (41 )%
Income from continuing operations before
income taxes 338 377 716 (10 )% (47 )%
Income tax (expense) benefit (46 ) 41 (41 ) NM NM
Income from continuing operations 292 418 675 (30 )% (38 )%
Income (loss) from discontinued
operations, net of tax 775 169 (39 ) 359 % NM
Net income 1,067 587 636 82 % (8 )%
Reconciliation of net income to adjusted
EBITDA:
Net income attributable to
noncontrolling interests (32 ) (36 ) (313 ) (11 )% (88 )%
Interest expense, net from continuing
operations 88 126 136 (30 )% (7 )%
Interest expense, net from discontinued
operations - - 36 - (100 )%
Income tax expense (benefit) from
continuing operations 46 (41 ) 41 NM NM
Income tax expense from discontinued
operations 242 35 86 591 % (59 )%
Depreciation and amortization of
continuing operations 283 270 252 5 % 7 %
Depreciation and amortization of
discontinued operations - 61 88 (100 )% (31 )%
Other adjustments:
Business acquisition and integration
expenses and purchase accounting
inventory adjustments 31 5 9
Merger costs - - 2
EBITDA from discontinued operations(2) (1,017 ) (265 ) (171 )
Noncontrolling interest of discontinued
operations - - 232
Fair value adjustments to Venator investment and related loss on disposal 88 18 62 Loss on early extinguishment of debt
- 23 3
Certain legal and other settlements and
related expenses 5 6 1
(Gain) loss on sale of businesses/assets (280 ) 21 -
Income from transition services
arrangements (7 ) - -
Certain nonrecurring information
technology project implementation costs 6 4 -
Amortization of pension and
postretirement actuarial losses 79 70 71
Plant incident remediation costs 2 8 -
Restructuring, impairment and plant
closing and transition costs
(credits)(3) 52 (41 ) (6 )
Adjusted EBITDA(1) $ 653 $ 851 $ 1,165 (23 )% (27 )%
Net cash provided by operating
activities from continuing operations $ 279 $ 645 $ 687 (57 )% (6 )%
Net cash provided by (used in) investing activities from continuing operations 1,736 (202 ) (630 )
NM (68 )%
Net cash used in financing activities (933 ) (438 ) (390 ) 113 %
12 %
Capital expenditures from continuing
operations (249 ) (274 ) (251 ) (9 )% 9 %
32--------------------------------------------------------------------------------
Table of ContentsHuntsman Corporation Year ended Year ended Year ended December 31, 2020 December 31, 2019 December 31, 2018 Tax Tax Tax Gross and other(4) Net Gross and other(4) Net Gross and other(4) Net Reconciliation of net income to adjusted net income Net income$ 1,066 $ 598 $ 650 Net income attributable to noncontrolling interests (32 ) (36 ) (313 ) Business acquisition and integration expenses and purchase accounting inventory adjustments$ 31 $ (6 ) 25$ 5 $ - 5$ 9 $ (3 ) 6 Merger costs - - - - - - 2 - 2 Income from discontinued operations(2)(6) (1,017 ) 242 (775 ) (265 ) 96 (169 ) (171 ) 210 39 Noncontrolling interest of discontinued operations - - - - - - 232 - 232 Fair value adjustments to Venator investment and related loss on disposal 88 (9 ) 79 18 - 18 62 -
62
Loss on early extinguishment of debt - - - 23 (5 ) 18 3 (1 )
2
Certain legal and other settlements and related expenses 5 (1 ) 4 6 (1 ) 5 1 (1 ) - (Gain) loss on sale of businesses/assets (280 ) 31 (249 ) 21 (5 ) 16 - - - Income from transition services arrangements (7 ) 2 (5 ) - - - - -
-
Certain nonrecurring information technology project implementation costs 6 (1 ) 5 4 (1 ) 3 - -
-
Amortization of pension and postretirement actuarial losses 76 (17 ) 59 66 (16 ) 50 67 (13 ) 54 Significant activities related to deferred tax assets and liabilities(5) - - - - (128 ) (128 ) - (119 ) (119 )U.S. Tax Reform Act impact on income tax expense - - - - (1 ) (1 ) - 32
32
Plant incident remediation costs 2 - 2 8 (2 ) 6 - -
-
Restructuring, impairment and plant closing and transition costs (credits)(3) 52 (13 ) 39 (41 ) 9 (32 ) (6 ) 1 (5 ) Adjusted net income(1)$ 218 $ 353 $ 642 Weighted average shares-basic 220.6 228.9
238.1
Weighted average shares-diluted 221.9 230.6 241.6 Basic net income (loss) attributable toHuntsman Corporation per share: Income from continuing operations$ 1.18 $ 1.72 $ 2.55 Income (loss) from discontinued operations 3.51 0.74 (1.13 ) Net income$ 4.69 $ 2.46 $ 1.42 Diluted net income (loss) attributable toHuntsman Corporation per share: Income from continuing operations$ 1.17 $ 1.70 $ 2.52 Income (loss) from discontinued operations 3.49 0.74 (1.13 ) Net income$ 4.66 $ 2.44 $ 1.39 Other non-GAAP measures: Diluted adjusted net income per share(1)$ 0.98 $ 1.53
Net cash provided by operating activities from continuing operations$ 277 $ 656 $ 704 Capital expenditures from continuing operations (249 ) (274 ) (251 ) Free cash flow from continuing operations(1)$ 28 $ 382 $ 453 Other cash flow measure: Taxes paid on sale of businesses(7)$ 257 $ - $ -
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NM-Not meaningful
(1) See "-Non-GAAP Financial Measures."
(2) Includes the gain on the sale of our Chemical Intermediates Businesses in
2020.
(3) Includes costs associated with transition activities relating to the
acquisition of CVC Thermoset Specialties in 2020 and transition activities in
2018 relating to the transition of our Textile Effects segment's production
from
included in either selling, general and administrative expenses or cost of
sales on our consolidated statements of operations.
(4) The income tax impacts, if any, of each adjusting item represent a ratable
allocation of the total difference between the unadjusted tax expense and the
total adjusted tax expense, computed without consideration of any adjusting
items using a with and without approach.
(5) During the year ended
benefit relating to the outside basis difference in our investment in
Venator, we recorded
losses on our remaining interest in Venator, we established
significant income tax valuation allowance in
million of deferred tax expense due to the reduction of tax rates in
million of significant income tax valuation allowances in
tax valuation allowances and deferred tax assets and liabilities from our
presentation of adjusted net income to allow investors to better compare our
ongoing financial performance from period to period.
(6) In addition to income tax impacts, this adjusting item is also impacted by
depreciation and amortization expense and interest expense. (7) Represents the taxes paid in connection with the sale of the Chemical
Intermediates Businesses and the sale of the
more information, see "Note 4. Discontinued Operations and Business
Disposition" to our consolidated financial statements.
33--------------------------------------------------------------------------------
Table of Contents Non-GAAP Financial Measures Our consolidated financial statements are prepared in accordance withU.S. GAAP, which we supplement with certain non-GAAP financial information. These non-GAAP measures should not be considered in isolation or as a substitute for the relatedU.S. GAAP measures, and other companies may define such measures differently. We encourage investors to review our financial statements and the reconciliation of the non-GAAP financial measures to the most directly comparableU.S. GAAP financial measures in their entirety and not to rely on any single financial measure. These non-GAAP measures exclude the impact of certain expenses that we do not believe are indicative of our core operating results. Adjusted EBITDA Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income ofHuntsman Corporation orHuntsman International , as appropriate, before interest, income tax, depreciation and amortization, net income attributable to noncontrolling interests and certain Corporate and other items, as well as eliminating the following adjustments: (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) merger costs; (c) EBITDA from discontinued operations; (d) noncontrolling interest of discontinued operations; (e) fair value adjustments to Venator investment and related loss on disposal; (f) loss on early extinguishment of debt; (g) certain legal and other settlements and related expenses; (h) (gain) loss on sale of businesses/assets; (i) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (j) certain nonrecurring information technology project implementation costs; (k) amortization of pension and postretirement actuarial losses; (l) plant incident remediation costs; and (m) restructuring, impairment and plant closing and transition costs (credits). We believe that net income ofHuntsman Corporation orHuntsman International , as appropriate, is the performance measure calculated and presented in accordance withU.S. GAAP that is most directly comparable to adjusted EBITDA. We believe adjusted EBITDA is useful to investors in assessing the businesses' ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses' operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income ofHuntsman Corporation orHuntsman International , as appropriate, or other measures of performance determined in accordance withU.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company's capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies. Nevertheless, our management recognizes that there are material limitations associated with the use of adjusted EBITDA in the evaluation of our Company as compared to net income ofHuntsman Corporation orHuntsman International , as appropriate, which reflects overall financial performance. For example, we have borrowed money in order to finance our operations and interest expense is a necessary element of our costs and ability to generate revenue. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplementU.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather thanU.S. GAAP results alone. Adjusted Net Income Adjusted net income is computed by eliminating the after tax amounts related to the following from net income attributable toHuntsman Corporation : (a) business acquisition and integration expenses and purchase accounting inventory adjustments; (b) merger costs; (c) loss (income) from discontinued operations; (d) noncontrolling interest of discontinued operations; (e) fair value adjustments to Venator investment and related loss on disposal; (f) loss on early extinguishment of debt; (g) certain legal and other settlements and related expenses; (h) gain on sale of businesses/assets; (i) income from transition services arrangements related to the sale of our Chemical Intermediates Businesses to Indorama; (j) certain nonrecurring information technology project implementation costs; (k) amortization of pension and postretirement actuarial losses; (l) significant activities related to deferred tax assets and liabilities; (m)U.S. Tax Reform Act impact on income tax expense; (n) plant incident remediation costs; and (o) restructuring, impairment and plant closing and transition costs (credits). Basic adjusted net income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net income per share reflects all potential dilutive common shares outstanding during the period and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities. Adjusted net income and adjusted net income per share amounts are presented solely as supplemental information. We believe adjusted net income is useful to investors in assessing the businesses' ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses' operational profitability and that may obscure underlying business results and trends. Free Cash Flow We believe free cash flow is an important indicator of our liquidity as it measures the amount of cash we generate. Management internally uses a free cash flow measure: (a) to evaluate our liquidity, (b) evaluate strategic investments, (c) plan stock buyback and dividend levels and (d) evaluate our ability to incur and service debt. We have historically defined free cash flow as cash flows provided by operating activities and used in investing activities, excluding acquisition/disposition activities and including non-recurring separation costs. Starting with the quarter endedMarch 31, 2020 , we updated our definition of free cash flow to a presentation more consistent with today's market standard of net cash provided by operating activities less capital expenditures. Free cash flow is not a defined term underU.S. GAAP, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures. 34
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Table of Contents Adjusted Effective Tax Rate We believe that the effective tax rate ofHuntsman Corporation orHuntsman International , as appropriate, is the performance measure calculated and presented in accordance withU.S. GAAP that is most directly comparable to adjusted effective tax rate. We believe our adjusted effective tax rate provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of the businesses' operational profitability and that may obscure underlying business results and trends. We do not provide reconciliations for adjusted effective tax rate on a forward-looking basis because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing and amounts of certain items, such as business acquisition and integration expenses and purchase accounting inventory adjustments, merger costs, certain legal and other settlements and related expenses, gains on sale of businesses/assets and amortization of pension and postretirement actuarial losses. Each of such adjustments have not yet occurred, is out of our control and/or cannot be reasonably predicted. For the same reasons, we are unable to address the probable significance of the unavailable information.
Year Ended
As discussed in "Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses" and "Note 4. Discontinued Operations and Business Dispositions-Separation and Deconsolidation of Venator" to our consolidated financial statements, the results from continuing operations presented exclude primarily the results of our Chemical Intermediates Businesses for all periods presented and the results of Venator for 2018. The decrease of$134 million in net income attributable toHuntsman Corporation and the decrease of$122 million in net income attributable toHuntsman International from continuing operations was the result of the following items:
? Revenues for the year ended
compared with the 2019 period. The decrease was primarily due to lower sales
volumes in all our segments and lower average selling prices in all our
segments, except for our Advanced Materials segment. See "-Segment Analysis"
below.
? Gross profit for the year ended
or 20%, as compared with the 2019 period. The decrease resulted from lower
gross profits in all our segments. See "-Segment Analysis" below.
? Our operating expenses and the operating expenses of
for the year ended
2019 period, primarily related to lower selling, general and administrative
costs resulting from cost suppression measures and actions taken to address
the economic impacts of COVID-19 as well as gains related to the sale of the
site, partially offset by an increase in selling, general and administrative
costs incurred in our newly acquired businesses of Icynene-Lapolla and CVC
Thermoset Specialties.
? Restructuring, impairment and plant closing costs (credits) for the year ended
activities, see "Note 13. Restructuring, Impairment and Plant Closing Costs
(Credits)" to our consolidated financial statements.
? Our interest expense, net and the interest expense, net of Huntsman
International for the year ended
and
the 2019 period, primarily related to repayments of outstanding borrowings on
our $1.2 billion senior revolving credit facility ("Revolving Credit
Facility") and other prepayable debt.
? Equity in income of investment in unconsolidated affiliates for the year ended
period. The decrease was primarily attributable to a decrease in income at our
PO/MTBE joint venture with Sinopec, of which we hold a 49% interest.
? We recorded a loss of
in Venator and related loss on disposal for the year ended
compared to a loss of
see "Note 4. Discontinued Operations and Business Dispositions-Separation and
Deconsolidation of Venator" to our consolidated financial statements.
? Loss on early extinguishment of debt for the year ended
nil compared to
full of our 2020 Senior Notes in the first quarter of 2019. See "Note. 15.
Debt-Notes" to our consolidated financial statements.
? Our income tax expense for the year ended
income tax expense of
2020 increased to
2019 period. The increase in income tax expense was primarily due to fewer
discrete benefit items in 2020 than in 2019. In 2020, discrete items include
tax benefits related to the sale of the
offset by foreign withholding tax on repatriated earnings. In 2019, discrete
items include tax benefits related to built-in capital losses and realized tax
losses both on our remaining interest in Venator, partially offset by tax
expense related to the establishment of valuation allowances in
the change in tax rate in
affected by the mix of income and losses in the tax jurisdictions in which we
operate, as impacted by the presence of valuation allowances in certain tax
jurisdictions. For further information concerning income taxes, see "Note 20.
Income Taxes" to our consolidated financial statements.
35--------------------------------------------------------------------------------
Table of Contents Segment Analysis
Year Ended
Percent
Change
Year ended December 31, Favorable
(Dollars in millions) 2020 2019 (Unfavorable)
Revenues
Polyurethanes $ 3,584 $ 3,911 (8 )%
Performance Products 1,023 1,158 (12 )%
Advanced Materials 839 1,044 (20 )%
Textile Effects 597 763 (22 )%
Corporate and eliminations (25 ) (79 ) NM
Total $ 6,018 $ 6,797 (11 )%
Huntsman Corporation
Segment adjusted EBITDA(1)
Polyurethanes $ 472 $ 548 (14 )%
Performance Products 164 168 (2 )%
Advanced Materials 130 201 (35 )%
Textile Effects 42 84 (50 )%
Corporate and other (161 ) (155 ) (4 )%
Total $ 647 $ 846 (24 )%
Huntsman International
Segment adjusted EBITDA(1)
Polyurethanes $ 472 $ 548 (14 )%
Performance Products 164 168 (2 )%
Advanced Materials 130 201 (35 )%
Textile Effects 42 84 (50 )%
Corporate and other (155 ) (150 ) (3 )%
Total $ 653 $ 851 (23 )%
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NM-Not meaningful (1) For more information, including reconciliation of segment adjusted EBITDA to
net income of
see "Note 27. Operating Segment Information" to our consolidated financial
statements.
Year ended
Average Selling Prices(1)
Local Foreign Currency Mix & Sales
Currency Translation Impact Other Volumes(2)
Period-Over-Period (Decrease) Increase
Polyurethanes (3 )% - - (5 )%
Performance Products (4 )% - 3 % (11 )%
Advanced Materials 2 % (1 )% (2 )% (19 )%
Textile Effects (3 )% (1 )% (2 )% (16 )%
FourthQuarter 2020 vs Third Quarter 2020
Average Selling Prices(1)
Local Foreign Currency Mix & Sales
Currency Translation Impact Other Volumes(2)
Period-Over-Period (Decrease) Increase
Polyurethanes 10 % 2 % 1 % (3 )%
Performance Products 2 % 1 % (8 )% 16 %
Advanced Materials 1 % 1 % 1 % 1 %
Textile Effects 1 % 1 % - 20 %
--------------------------------------------------------------------------------
(1) Excludes revenues from tolling arrangements, byproducts and raw materials.
(2) Excludes sales volumes of byproducts and raw materials.
36
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Table of Contents Polyurethanes The decrease in revenues in our Polyurethanes segment for 2020 compared to 2019 was due to lower MDI average selling prices and lower overall polyurethanes sales volumes. MDI average selling prices decreased across most major markets in relation to the global economic slowdown resulting from the COVID-19 pandemic. Overall polyurethanes sales volumes decreased primarily in relation to the global economic slowdown and the resulting decrease in demand across most major markets, partially offset by additional sales volumes in connection with the Icynene-Lapolla Acquisition. The decrease in segment adjusted EBITDA was primarily due to lower component and polymeric systems margins largely driven by lower MDI pricing and lower polyurethanes sales volumes, partially offset by lower raw material costs and lower fixed costs. Performance Products The decrease in revenues in our Performance Products segment for 2020 compared to 2019 was due to lower sales volumes and lower average selling prices. Sales volumes decreased primarily in relation to the global economic slowdown resulting from the COVID-19 pandemic. Average selling prices decreased primarily related to lower raw material costs. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, mostly offset by lower fixed costs. Advanced Materials The decrease in revenues in our Advanced Materials segment for 2020 compared to 2019 was due to lower sales volumes, slightly offset by higher average selling prices. Sales volumes decreased significantly across all markets, except in our global power market, primarily in relation to the global economic slowdown resulting from the COVID-19 pandemic, partially offset by additional sales volumes related to the CVC Thermoset Specialties Acquisition. Average selling prices increased in response to cost increases, partially offset by the impact of a strongerU.S. dollar against major international currencies. The decrease in segment adjusted EBITDA was primarily due to lower sales volumes, partially offset by lower fixed costs. Textile Effects The decrease in revenues in our Textile Effects segment for 2020 compared to 2019 was due to lower average selling prices and lower sales volumes. Average selling prices decreased as a result of product mix change, competitive market pressures and the impact of a strongerU.S. dollar against major international currencies. Sales volumes decreased primarily due to significantly weaker demand in relation to the global economic slowdown resulting from the COVID-19 pandemic. The decrease in segment adjusted EBITDA was primarily due to lower sales revenues and lower capitalization of indirect costs because of reduced production, partially offset by lower raw material costs and lower fixed costs. Corporate and other Corporate and other includes unallocated corporate overhead, unallocated foreign currency exchange gains and losses, LIFO inventory valuation reserve adjustments, loss on early extinguishment of debt, unallocated restructuring, impairment and plant closing costs, nonoperating income and expense and gains and losses on the disposition of corporate assets. For 2020, adjusted EBITDA from Corporate and other forHuntsman Corporation decreased by$6 million to a loss of$161 million from a loss of$155 million for 2019. For 2020, adjusted EBITDA from Corporate and other forHuntsman International decreased by$5 million to a loss of$155 million from a loss of$150 million for 2019. The decrease in adjusted EBITDA from Corporate and other resulted primarily from a charge from a LIFO inventory reserve adjustment, partially offset by an increase in unallocated foreign currency exchange gains.
Year Ended
For a comparison of our results of operations for the fiscal years endedDecember 31, 2019 and 2018, see "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 filed with theSEC onFebruary 13, 2020 .
Liquidity and Capital Resources
The following is a discussion of our liquidity and capital resources and
generally does not include separate information with respect to
Cash Flows For Year Ended
Net cash provided by operating activities from continuing operations for 2020 and 2019 was$277 million and$656 million , respectively. The decrease in net cash provided by operating activities from continuing operations during 2020 compared with 2019 was primarily attributable to decreased operating income as described in "-Results of Operations" above, including$257 million of cash paid for taxes in connection with the sale of the Chemical Intermediates Businesses and the sale of theIndia -based DIY business, partially offset by a$338 million unfavorable variance in operating assets and liabilities for 2020 as compared with 2019. Net cash provided by (used in) investing activities from continuing operations for 2020 and 2019 was$1,462 million and$(201) million , respectively. During 2020 and 2019, we paid$249 million and$274 million , respectively, for capital expenditures, including$54 million and$13 million during 2020 and 2019, respectively, on a new MDI splitter inGeismar, Louisiana . InJanuary 2020 , we received approximately$1.92 billion for the sale of our Chemical Intermediates Businesses. Additionally, inNovember 2020 , we received approximately$257 million for the sale of theIndia -based DIY business. See "Note 4. Discontinued Operations and Business Dispositions-Sale of Chemical Intermediates Businesses" and "Note 4. Discontinued Operations and Business Dispositions-Sale of India-Based Do-It-Yourself Consumer Adhesives Business" to our consolidated financial statements. InDecember 2020 , we completed the sale of approximately 42.4 million ordinary shares of Venator and received approximately$99 million . See "Note 4. Discontinued operations and Business Dispositions-Separation and Deconsolidation of Venator" to our consolidated financial statements. During 2020, we paid approximately$650 million for the acquisition of businesses, net of cash acquired. See "Note 3. Business Combinations and Acquisitions" to our consolidated financial statements. During the year endedDecember 31, 2020 , we entered into a sale and leaseback agreement to sell certain properties inBasel, Switzerland , for which we received approximately$73 million in proceeds from the sale of assets. During the year endedDecember 31, 2019 , we received approximately$49 million in proceeds from the sale of assets in connection with the closure of certain Textile Effects facilities and offices inBasel, Switzerland . During 2019, we received$16 million in proceeds from the settlement of theDecember 3, 2018 sale of Venator ordinary shares toBank of America N.A . 37
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Table of Contents
Net cash used in financing activities for 2020 and 2019 was$655 million and$450 million , respectively. The increase in net cash used in financing activities was primarily due to the increase in repayments on our Revolving Credit Facility during 2020 as compared with 2019, the repayment in full of our 364-day term loan facility ("2019 Term Loan") in the third quarter of 2020 and the proceeds from the issuance of our 2029 Senior Notes in the first quarter of 2019, partially offset by a decrease in repurchases of common stock during 2020 as compared with 2019 and cash paid in the third quarter of 2019 to acquire the 50% noncontrolling interest that we did not own in the Sasol-Huntsman joint venture. Free cash flow from continuing operations for 2020 and 2019 were proceeds of cash of$28 million and$382 million , respectively. The reduction in free cash flow was primarily attributable to the decrease in cash provided by operating activities from continuing operations, partially offset by a decrease in cash used for capital expenditures during 2020 as compared with 2019.
Cash Flows For Year Ended
For a comparison of our cash flows for the fiscal years endedDecember 31, 2019 and 2018, see "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 filed with theSEC onFebruary 13, 2020 .
Changes in Financial Condition
The following information summarizes our working capital (dollars in millions):
December 31, Less December 31, Increase Percent
2020 Acquisitions(1) Subtotal 2019 (Decrease) Change
Cash and cash
equivalents $ 1,593 $ (7 ) $ 1,586 $ 525 $ 1,061 202 %
Accounts and notes
receivable, net 910 (48 ) 862 953 (91 ) (10 )%
Inventories 848 (69 ) 779 914 (135 ) (15 )%
Other current assets 217 (1 ) 216 155 61 39 %
Current assets held for
sale(2) - - - 1,208 (1,208 ) (100 )%
Total current assets 3,568 (125 ) 3,443 3,755 (312 ) (8 )%
Accounts payable 876 (20 ) 856 822 34 4 %
Accrued liabilities 458 (11 ) 447 420 27 6 %
Current portion of debt 593 - 593 212 381 180 %
Current operating lease
liabilities 52 - 52 42 10 24 %
Current liabilities
held for sale(2) - - - 512 (512 ) (100 )%
Total current
liabilities 1,979 (31 ) 1,948 2,008 (60 ) (3 )%
Working capital $ 1,589 $ (94 ) $ 1,495 $ 1,747 $ (252 ) (14 )%
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(1) Represents combined amounts related to the Icynene-Lapolla Acquisition and
the CVC Thermoset Specialties Acquisition. For more information, see "Note 3.
Business Combinations and Acquisitions" to our consolidated financial
statements.
(2) Represents amounts related to the sale of our Chemical Intermediates
Businesses. The assets and liabilities held for sale were classified as
current as of
Intermediates Businesses on
4. Discontinued Operations and Business Dispositions-Sale of Chemical
Intermediates Businesses" to our consolidated financial statements.
Our working capital decreased by
? The increase in cash and cash equivalents of
matters identified on our consolidated statements of cash flows. See also
"-Cash Flows Year Ended
31, 2019."
? Accounts and notes receivable decreased by $91 million primarily due toimproved days sales outstanding and reduction of overdue accounts receivable
year-over-year, despite slightly higher revenues in the fourth quarter of 2020
compared to the fourth quarter of 2019.
? Inventories decreased by
and volumes.
? Other current assets increased by
current income tax receivable and in prepaid insurance.
? Accounts payable increased by
payable outstanding year-over-year and higher capital expenditures in the
fourth quarter of 2020 compared to the fourth quarter of 2019.
? Current portion of debt increased by
classification of our 2021 Senior Notes, offset in part by our repayment of
the 2019 Term Loan in full at maturity.
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Table of Contents Direct and Subsidiary Debt
See "Note 15. Debt-Direct and Subsidiary Debt" to our consolidated financial statements.
Debt Issuance Costs
See "Note 15. Debt-Direct and Subsidiary Debt-Debt Issuance Costs" to our consolidated financial statements.
Revolving Credit Facility
See "Note 15. Debt-Direct and Subsidiary Debt-Revolving Credit Facility" to our consolidated financial statements.
Term Loan Credit Facility
See "Note 15. Debt-Direct and Subsidiary Debt-Term Loan Credit Facility" to our consolidated financial statements.
A/R Programs
See "Note 15. Debt-Direct and Subsidiary Debt-A/R Programs" to our consolidated financial statements.
Notes
See "Note 15. Debt-Direct and Subsidiary Debt-Notes" to our consolidated financial statements.
Variable Interest Entity Debt
See "Note 15. Debt-Direct and Subsidiary Debt-Variable Interest Entity Debt" to our consolidated financial statements.
Note Payable from
See "Note 15. Debt-Direct and Subsidiary Debt-Note Payable from
Compliance With Covenants
See "Note 15. Debt-Compliance with Covenants" to our consolidated financial statements.
Maturities
See "Note 15. Debt-Maturities" to our consolidated financial statements.
39
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Table of Contents Short-Term Liquidity We depend upon our cash, Revolving Credit Facility,U.S. accounts receivable securitization program ("U.S. A/R Program") and European accounts receivable securitization program ("EU A/R Program" and collectively with theU.S. A/R Program, "A/R Programs") and other debt instruments to provide liquidity for our operations and working capital needs. As ofDecember 31, 2020 , we had$2,952 million of combined cash and unused borrowing capacity, consisting of$1,593 million in cash,$1,194 million in availability under our Revolving Credit Facility and$165 million in availability under our A/R Programs. Our liquidity can be significantly impacted by various factors. The following matters had, or are expected to have, a significant impact on our liquidity:
? Cash proceeds from our accounts receivable and inventory, net of accounts
payable, were approximately
consolidated statements of cash flows. We expect volatility in our working
capital components to continue.
? During 2021, we expect to spend between approximately
million on capital expenditures, including spending of approximately
million on a new MDI splitter in
spending on all capital expenditures with cash provided by operations,
including proceeds received from the sale of the
properties. See "Note 1. General-Recent Developments-Sale of Assets at our
? During 2020, we made contributions to our pension and postretirement benefit
plans of
amount of approximately
? On
Company to repurchase up to an additional
stock in addition to the
repurchase authorization. Repurchases may be made through the open market,
including through accelerated share repurchase programs, or in privately
negotiated transactions, and repurchases may be commenced or suspended from
time to time without prior notice. Shares of common stock acquired through the
repurchase program are held in treasury at cost. During the first quarter of
2020, we repurchased 5,364,519 shares of our common stock for approximately
to the end of the first quarter of 2020, we suspended share repurchases under
our existing share repurchase program in order to enhance our liquidity
position in response to COVID-19.
? During 2020, management implemented cost realignment and synergy plans. In
connection with these plans, we expect to achieve annualized cost savings and
synergy benefits of more than
net cash restructuring and integration costs of approximately
See "Note 13. Restructuring, Impairment and Plant Closing Costs (Credits)" to
our consolidated financial statements.
? In
certain properties in
67 (approximately
years.
? On
part of the Advanced Materials segment, to Pidilite Industries Ltd. and
received cash of approximately
we may receive up to approximately
earnout within 18 months if the business achieves certain sales revenue
targets in line with the DIY business' 2019 performance.
? On
ordinary shares of Venator and received approximately
which includes
approximate 9.7 million ordinary shares we hold in Venator at
share. See "Part I. Item 1. Business-Recent Developments-Sale of Venator
Interest."
? On
million) in aggregate principal amount of our 2021 Senior Notes at the
redemption price equal to 100% of the principal amount of the notes, plus
accrued and unpaid interest to, but not including, the redemption date. Upon
the redemption of the 2021 Senior Notes, we expect to incur an incremental
cash tax liability of approximately
due to the
of the notes.
? On
specialty chemical manufacturer of specialty additives and epoxy curing agents
for the coatings, adhesives, sealants and composite end-markets, from funds
affiliated with Audax Private Equity in an all-cash transaction of
approximately
from available liquidity. The acquired business will be integrated into our
Advanced Materials segment.
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Table of Contents Long-Term Liquidity
? We have deferred a portion of capital spending on a new MDI splitter in
expect to fund spending on all capital expenditures with cash provided by
operations.
As of December 31, 2020 , we had $593 million classified as current portion of
debt, including $545 million on our 2021 Senior Notes, which we redeemed in full
on January 15, 2021 , debt at our variable interest entities of $47 million and
certain other short-term facilities and scheduled amortization payments totaling
$1 million . We intend to renew, repay or extend the majority of these short-term
facilities in the next twelve months.
As of
Restructuring, Impairment and Plant Closing Costs
For a discussion of restructuring plans and the costs involved, see "Note 13. Restructuring, Impairment and Plant Closing Costs" to our consolidated financial statements.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see "Note 2. Summary of Significant Accounting Policies" to our consolidated financial statements.
Critical Accounting Estimates This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of financial statements requires us to make judgments, estimates and assumptions that involve a significant level of estimation and uncertainty and are reasonably likely to have a material impact on our financial condition and/or results of operations. Summarized below are our critical accounting estimates. Income Taxes Deferred income taxes reflect the net effects of temporary differences between assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized; valuation allowances are recorded to offset deferred tax assets unlikely to be realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets. These conclusions require significant judgments. In evaluating the objective evidence that historical results provide, we consider the cyclicality of businesses and cumulative income or losses. Cumulative historical losses incurred over periods of time limit our ability to consider more subjective projections of future taxable income. Changes in expected future taxable income and tax planning strategies in applicable jurisdictions affect our assessment of the realization of deferred tax assets. Our judgments regarding valuation allowances are also influenced by factors outside of business results that could impact our ability to utilize a deferred tax asset. As ofDecember 31, 2020 , we had total valuation allowances of$206 million , which represents a decrease of$25 million from the prior year, and we have recognized net deferred tax assets of$76 million . See "Note 20. Income Taxes" to our consolidated financial statements for more information regarding our deferred tax assets and valuation allowances. 41
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Table of Contents Employee Benefit Programs We sponsor several contributory and non-contributory defined benefit plans, covering employees primarily in theU.S. , theU.K. ,The Netherlands ,Belgium andSwitzerland , but also covering employees in a number of other countries. We fund the material plans through trust arrangements (or local equivalents) where the assets are held separately from us. We also sponsor unfunded postretirement plans which provide medical and, in some cases, life insurance benefits covering certain employees in theU.S. andCanada . Amounts recorded in our consolidated financial statements are recorded based upon actuarial valuations performed by various independent actuaries. Inherent in these valuations are numerous assumptions regarding expected long-term rates of return on plan assets, discount rates, compensation increases, mortality rates and health care cost trends. Each of these critical estimates are subject to uncertainty and are assessed by us using historical data, as well as projections of future conditions. These assumptions and changes during the period are described in "Note 19. Employee Benefit Plans" to our consolidated financial statements.
We retain third party actuaries to assist us with judgments necessary to make assumptions on which our employee pension and postretirement benefit plan obligations and expenses are based. The effect of a 1% change in three key assumptions is summarized as follows (dollars in millions):
Statement of Balance Sheet
Assumptions Operations(1) Impact(2)
Discount rate
-1% increase $ (36 ) $ (545 )
-1% decrease 44 622
Expected long-term rates of return on plan assets
-1% increase (21 ) -
-1% decrease 21 -
Rate of compensation increase
-1% increase 10 54
-1% decrease (6 ) (61 )
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(1) Estimated (decrease) increase on 2020 net periodic benefit cost
(2) Estimated (decrease) increase on
liabilities and accumulated other comprehensive loss
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